UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2016

OR

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-20293

UNION BANKSHARES CORPORATION

(Exact name of registrant as specified in its charter)

VIRGINIA	54-1598552
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

 

1051 East Cary Street

Suite 1200

Richmond, Virginia 23219

(Address of principal executive offices) (Zip Code)

 

(804) 633-5031

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

	Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

	Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

	Yes ¨ No x

 

The number of shares of common stock outstanding as of August 1, 2016 was 43,533,044.

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UNION BANKSHARES CORPORATION

FORM 10-Q

INDEX

 

ITEM			PAGE
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015		2
	Consolidated Statements of Income for the three and six months ended June 30, 2016 and 2015		3
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2016 and 2015		4
	Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2016 and 2015		5
	Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015		6
	Notes to Consolidated Financial Statements		7
	Report of Independent Registered Public Accounting Firm		44
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		46
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		65
Item 4.	Controls and Procedures		68
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings		68
Item 1A.	Risk Factors		68
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		68
Item 6.	Exhibits		70
	Signatures		71

ii

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Glossary of Acronyms

 

AFS	–	Available for sale
ALCO	–	Asset Liability Committee
ALL	–	Allowance for loan losses
ASC	–	Accounting Standards Codification
ASU	–	Accounting Standards Update
ATM	–	Automated teller machine
the Bank	–	Union Bank & Trust
bps	–	Basis points
the Company	–	Union Bankshares Corporation
Dodd-Frank Act	–	Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
EPS	–	Earnings per share
Exchange Act	–	Securities Exchange Act of 1934
FASB	–	Financial Accounting Standards Board
FDIC	–	Federal Deposit Insurance Corporation
Federal Reserve	–	Board of Governors of the Federal Reserve System
Federal Reserve Bank	–	Federal Reserve Bank of Richmond
FHLB	–	Federal Home Loan Bank of Atlanta
U.S. GAAP or GAAP	–	Accounting principles generally accepted in the United States
HELOC	–	Home equity line of credit
HTM	–	Held to maturity
LIBOR	–	London Interbank Offered Rate
NPA	–	Nonperforming assets
ODCM	–	Old Dominion Capital Management, Inc.
OREO	–	Other real estate owned
OTTI	–	Other than temporary impairment
PCI	–	Purchased credit impaired
StellarOne	–	StellarOne Corporation
TDR	–	Troubled debt restructuring
UMG	–	Union Mortgage Group, Inc.

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PART I – FINANCIAL INFORMATION

 

ITEM 1 – FINANCIAL STATEMENTS

 

UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

	June 30, 2016				December 31, 2015
	(Unaudited)				(Audited)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	128,896			$	111,323
Interest-bearing deposits in other banks	87,887				29,670
Federal funds sold	251				1,667
Total cash and cash equivalents	217,034				142,660
Securities available for sale, at fair value	949,663				903,292
Securities held to maturity, at carrying value	202,917				205,374
Restricted stock, at cost	62,206				51,828
Loans held for sale	38,114				36,030
Loans held for investment, net of deferred fees and costs	5,941,098				5,671,462
Less allowance for loan losses	35,074				34,047
Net loans held for investment	5,906,024				5,637,415
Premises and equipment, net	124,032				126,028
Other real estate owned, net of valuation allowance	13,381				15,299
Core deposit intangibles, net	19,685				23,310
Goodwill	297,659				293,522
Bank owned life insurance	176,413				173,687
Other assets	93,433				84,846
Total assets	$	8,100,561			$	7,693,291
LIABILITIES
Noninterest-bearing demand deposits	$	1,392,734			$	1,372,937
Interest-bearing deposits	4,703,092				4,590,999
Total deposits	6,095,826				5,963,936
Securities sold under agreements to repurchase	121,262				84,977
Other short-term borrowings	557,000				304,000
Long-term borrowings	274,547				291,198
Other liabilities	62,725				53,813
Total liabilities	7,111,360				6,697,924
Commitments and contingencies (Note 6)
STOCKHOLDERS' EQUITY
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,619,867 shares and 44,785,674 shares, respectively.	57,537				59,159
Additional paid-in capital	605,018				631,822
Retained earnings	317,747				298,134
Accumulated other comprehensive income	8,899				6,252
Total stockholders' equity	989,201				995,367
Total liabilities and stockholders' equity	$	8,100,561			$	7,693,291

See accompanying notes to consolidated financial statements.

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UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands, except share data)

	Three Months Ended								Six Months Ended
	June 30, 2016				June 30, 2015				June 30, 2016				June 30, 2015
Interest and dividend income:
Interest and fees on loans	$	64,747			$	62,604			$	127,694			$	123,057
Interest on deposits in other banks	65				24				112				41
Interest and dividends on securities:
Taxable	4,510				3,860				8,826				7,667
Nontaxable	3,459				3,366				6,898				6,690
Total interest and dividend income	72,781				69,854				143,530				137,455
Interest expense:
Interest on deposits	4,197				3,680				8,393				7,000
Interest on federal funds purchased	2				4				3				5
Interest on short-term borrowings	708				255				1,329				505
Interest on long-term borrowings	2,098				2,099				4,298				4,160
Total interest expense	7,005				6,038				14,023				11,670
Net interest income	65,776				63,816				129,507				125,785
Provision for credit losses	2,300				3,749				4,904				5,499
Net interest income after provision for credit losses	63,476				60,067				124,603				120,286
Noninterest income:
Service charges on deposit accounts	4,754				4,622				9,488				8,835
Other service charges and fees	4,418				4,051				8,574				7,634
Fiduciary and asset management fees	2,333				2,312				4,471				4,531
Mortgage banking income, net	2,972				2,574				5,117				4,952
Gains on securities transactions, net	3				404				146				597
Bank owned life insurance income	1,361				1,134				2,734				2,269
Other operating income	2,152				1,115				3,377				2,448
Total noninterest income	17,993				16,212				33,907				31,266
Noninterest expenses:
Salaries and benefits	28,519				25,561				56,567				53,052
Occupancy expenses	4,809				5,173				9,785				10,305
Furniture and equipment expenses	2,595				2,989				5,232				5,803
Printing, postage, and supplies	1,280				1,408				2,419				2,779
Communications expense	927				1,143				2,016				2,322
Technology and data processing	3,608				3,216				7,422				6,471
Professional services	2,548				1,669				4,537				3,017
Marketing and advertising expense	1,924				2,372				3,863				4,060
FDIC assessment premiums and other insurance	1,379				1,280				2,741				2,679
Other taxes	1,607				1,554				3,225				3,105
Loan-related expenses	855				687				1,454				1,371
OREO and credit-related expenses	894				1,965				1,463				3,152
Amortization of intangible assets	1,745				2,138				3,625				4,361
Training and other personnel costs	905				912				1,649				1,633
Other expenses	1,656				3,174				3,525				4,971
Total noninterest expenses	55,251				55,241				109,523				109,081
Income before income taxes	26,218				21,038				48,987				42,471
Income tax expense	6,881				5,690				12,689				11,422
Net income	$	19,337			$	15,348			$	36,298			$	31,049
Basic earnings per common share	$	0.44			$	0.34			$	0.82			$	0.69
Diluted earnings per common share	$	0.44			$	0.34			$	0.82			$	0.69
Dividends declared per common share	$	0.19			$	0.17			$	0.38			$	0.32
Basic weighted average number of common shares outstanding	43,746,583				45,128,698				43,998,929				45,117,396
Diluted weighted average number of common shares outstanding	43,824,183				45,209,814				44,075,706				45,198,727

See accompanying notes to consolidated financial statements.

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UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in thousands)

 

	Three Months Ended June 30,								Six Months Ended June 30,
	2016				2015				2016				2015
Net income	$	19,337			$	15,348			$	36,298			$	31,049
Other comprehensive income (loss):
Cash flow hedges:
Change in fair value of cash flow hedges	(1,007		)		1,809				(3,688		)		319
Reclassification adjustment for losses (gains) included in net income (net of tax, $74 and $22 for the three months and $150 and $169 for the six months ended June 30, 2016 and 2015, respectively)	138				41				279				313
AFS securities:
Unrealized holding gains (losses) arising during period (net of tax, $1,991 and $3,686 for the three months and $3,624 and $1,649 for the six months ended June 30, 2016 and 2015, respectively)	3,698				(6,845		)		6,730				(3,062		)
Reclassification adjustment for losses (gains) included in net income (net of tax, $1 and $142 for the three months and $51 and $209 for the six months ended June 30, 2016 and 2015, respectively)	(2		)		(263		)		(95		)		(388		)
HTM securities:
Accretion of unrealized gain for AFS securities transferred to HTM (net of tax, $155 and $112 for the three months and $312 and $112 for the six months ended June 30, 2016 and 2015, respectively)	(287		)		(208		)		(579		)		(208		)
Other comprehensive income (loss)	2,540				(5,466		)		2,647				(3,026		)
Comprehensive income	$	21,877			$	9,882			$	38,945			$	28,023

See accompanying notes to consolidated financial statements.

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UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

SIX MONTHS ENDED JUNE 30, 2016 AND 2015

(Dollars in thousands, except share amounts)

 

	Common Stock				Additional Paid-In Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Total
Balance - December 31, 2014	$	59,795			$	643,443			$	261,676			$	12,255			$	977,169
Net income - 2015									31,049								31,049
Other comprehensive income (net of taxes of $1,801)													(3,026		)		(3,026		)
Dividends on common stock ($0.32 per share)									(13,727		)						(13,727		)
Stock purchased under stock repurchase plan (181,356 shares)	(240		)		(3,890		)										(4,130		)
Issuance of common stock under Dividend Reinvestment Plan (33,710 shares)	45				656				(701		)						—
Issuance of common stock under Equity Compensation Plans (25,873 shares)	34				386												420
Issuance of common stock for services rendered (9,200 shares)	12				188												200
Vesting of restricted stock, including tax effects, under Equity Compensation Plans (20,049 shares)	26				(250		)										(224		)
Stock-based compensation expense					403												403
Balance - June 30, 2015	$	59,672			$	640,936			$	278,297			$	9,229			$	988,134
Balance - December 31, 2015	$	59,159			$	631,822			$	298,134			$	6,252			$	995,367
Net income - 2016									36,298								36,298
Other comprehensive income (net of taxes of $3,411)													2,647				2,647
Issuance of common stock in regard to acquisition (17,232 shares)	23				430												453
Dividends on common stock ($0.38 per share)									(16,685		)						(16,685		)
Stock purchased under stock repurchase plan (1,312,556 shares)	(1,747		)		(28,943		)										(30,690		)
Issuance of common stock under Equity Compensation Plans (34,227 shares)	46				436												482
Issuance of common stock for services rendered (9,552 shares)	13				227												240
Vesting of restricted stock, including tax effects, under Equity Compensation Plans (31,993 shares)	43				(441		)										(398		)
Stock-based compensation expense					1,487												1,487
Balance - June 30, 2016	$	57,537			$	605,018			$	317,747			$	8,899			$	989,201

See accompanying notes to consolidated financial statements.

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UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2016 AND 2015

(Dollars in thousands)

	2016				2015
Operating activities:
Net income	$	36,298			$	31,049
Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities:
Depreciation of premises and equipment	4,983				5,374
Writedown of OREO	400				1,300
Amortization, net	5,915				6,946
Amortization (accretion) related to acquisition, net	1,077				705
Provision for credit losses	4,904				5,499
Losses (gains) on securities transactions, net	(146		)		(597		)
Bank owned life insurance income	(2,734		)		(2,269		)
Decrease (increase) in loans held for sale, net	(2,084		)		3,069
Losses (gains) on sales of other real estate owned, net	(1		)		100
Losses (gains) on sales of premises, net	72				74
Stock-based compensation expenses	1,487				403
Issuance of common stock for services	240				200
Net decrease (increase) in other assets	(8,549		)		(530		)
Net increase (decrease) in other liabilities	1,796				(11,213		)
Net cash and cash equivalents provided by (used in) operating activities	43,658				40,110
Investing activities:
Purchases of securities available for sale	(122,690		)		(122,049		)
Proceeds from sales of securities available for sale	15,424				58,157
Proceeds from maturities, calls and paydowns of securities available for sale	56,414				70,086
Proceeds from maturities, calls and paydowns of securities held to maturity	610				—
Net decrease (increase) in loans held for investment	(271,689		)		(168,449		)
Net decrease (increase) in premises and equipment	(3,059		)		(3,284		)
Proceeds from sales of other real estate owned	2,138				5,609
Improvements to other real estate owned	—				(299		)
Cash paid for equity-method investments	—				(355		)
Cash paid in acquisition	(4,077		)		—
Cash acquired in acquisitions	207				—
Net cash and cash equivalents provided by (used in) investing activities	(326,722		)		(160,584		)
Financing activities:
Net increase (decrease) in noninterest-bearing deposits	19,797				90,298
Net increase (decrease) in interest-bearing deposits	112,093				57,096
Net increase (decrease) in short-term borrowings	289,285				(6,713		)
Net increase (decrease) in long-term borrowings	(16,446		)		1,027
Cash dividends paid - common stock	(16,685		)		(13,727		)
Repurchase of common stock	(30,690		)		(4,130		)
Issuance of common stock	482				420
Vesting of restricted stock, including tax effects	(398		)		(224		)
Net cash and cash equivalents provided by (used in) financing activities	357,438				124,047
Increase (decrease) in cash and cash equivalents	74,374				3,573
Cash and cash equivalents at beginning of the period	142,660				133,260
Cash and cash equivalents at end of the period	$	217,034			$	136,833
Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest	$	14,212			$	13,784
Income taxes	15,800				12,400
Supplemental schedule of noncash investing and financing activities
Unrealized (losses) gains on securities available for sale	$	10,208			$	(5,308	)
Transfer from securities available for sale to securities held to maturity	—				201,822
Changes in fair value of interest rate swap loss	(3,409		)		632
Transfers between loans and other real estate owned	619				412
Transfers from bank premises to other real estate owned	—				402
Issuance of common stock in exchange for net assets in acquisition	453				—

See accompanying notes to consolidated financial statements.

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UNION BANKSHARES CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

1. ACCOUNTING POLICIES

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant inter-company accounts and transactions have been eliminated in consolidation.

 

The unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and follow general practice within the banking industry. Accordingly, the unaudited consolidated financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements. However, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of the interim periods presented have been made. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year.

 

These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2015 Annual Report on Form 10-K. Certain prior period amounts have been reclassified to conform to current period presentation.

Business Combinations

On May 31, 2016, the Bank completed its acquisition of ODCM, a Charlottesville, Virginia based registered investment advisor with nearly $300.0 million in assets under management.   The acquisition date fair value of consideration transferred totaled $9.1 million, which consisted of $4.1 million cash, $0.5 million stock, and the remainder being contingent on achieving certain performance metrics.  The contingent consideration is carried at fair value and is reported as a component of “Other Liabilities” in the Consolidated Balance Sheet.  The fair value of this liability will be assessed at each reporting period. 

In connection with the transaction, the Company recorded $4.1 million in goodwill and $3.8 million of amortizable assets which primarily relate to the value of customer relationships.  The Company currently estimates that these other intangibles assets will be amortized over 10 years using a straight-line method.  The transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair values on the acquisition date. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition.

 

Loans

The Company originates commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by commercial and residential real estate loans (including acquisition and development loans and residential construction loans) throughout its market area. The ability of the Company’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in those markets, as well as other factors.

 

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

 

As of January 1, 2016, the Company enhanced the loan portfolio segmentation to better align with how the Company manages credit risk and to better align with industry practice. Below is a summary of the new loan segmentation.

 

Construction and Land Development – construction loans generally made to commercial and residential builders for specific construction projects. The successful repayment of these types of loans is generally dependent upon (a) a commitment for permanent financing from the Company, or (b) from the sale of the constructed property. These loans carry more risk than both types of commercial real estate term loans due to the dynamics of construction projects, changes in interest rates, the long-term financing market, and state and local government regulations. As in commercial real estate term lending, the Company manages risk by using specific underwriting policies and procedures for these types of loans and by avoiding excessive concentrations to any one business or industry.

 

Also, included in this category are loans generally made to residential home builders to support their lot and home inventory needs. Repayment relies upon the successful performance of the underlying residential real estate project. This type of lending carries a higher level of risk as compared to other commercial lending. This class of lending manages risks related to residential

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real estate market conditions, a functioning first and secondary market in which to sell residential properties, and the borrower’s ability to manage inventory and run projects. The Company manages this risk by lending to experienced builders and developers, by using specific underwriting policies and procedures for these types of loans, and by avoiding excessive concentrations with any particular customer or geographic region.

 

Commercial Real Estate – Owner Occupied - term loans made to support owner occupied real estate properties that rely upon the successful operation of the business occupying the property for repayment. General market conditions and economic activity may affect these types of loans. In addition to using specific underwriting policies and procedures for these types of loans, the Company manages risk by avoiding concentrations to any one business or industry.

 

Commercial Real Estate – Non-Owner Occupied - term loans typically made to borrowers to support income producing properties that rely upon the successful operation of the property for repayment. General market conditions and economic activity may impact the performance of these types of loans. In addition to using specific underwriting policies and procedures for these types of loans, the Company manages risk by diversifying the lending to various lines of businesses, such as retail, office, office warehouse, and hotel as well as avoiding concentrations to any one business or industry.

 

Residential 1-4 Family – loans generally made to both commercial and residential borrowers. Mortgage loan portfolios carry risks associated with the creditworthiness of the borrower or the tenant and changes in loan-to-value ratios. The Company manages these risks through policies and procedures such as limiting loan-to-value ratios at origination, experienced underwriting, requiring standards for appraisers, and not making subprime loans.

 

Multifamily Real Estate – loans made to real estate investors to support permanent financing for multifamily residential income producing properties that rely on the successful operation of the property for repayment. This management mainly involves property maintenance and collection of rents due from tenants. This type of lending carries a lower level of risk as compared to other commercial lending. In addition, underwriting requirements for multifamily properties are stricter than for other non-owner-occupied property types. The Company manages this risk by avoiding concentrations with any particular customer.

 

Commercial and Industrial – loans generally made to support the Company’s borrowers’ need for equipment/vehicle purchases and other short-term or seasonal cash flow needs. Repayment relies upon the successful operation of the business. This type of lending carries a lower level of commercial credit risk as compared to other commercial lending. The Company manages this risk by using general underwriting policies and procedures for these types of loans and by avoiding concentrations to any one business or industry.

 

HELOC – the consumer HELOC portfolio carries risks associated with the creditworthiness of the borrower and changes in loan-to-value ratios. The Company manages these risks through policies and procedures such as limiting loan-to-value ratios at origination, experienced underwriting, requiring standards for appraisers, and not making subprime loans.

 

Auto – the consumer indirect auto lending portfolio generally carries certain risks associated with the values of the collateral that management must mitigate. The Company focuses its indirect auto lending on one to two year old used vehicles where substantial depreciation has already occurred thereby minimizing the risk of significant loss of collateral values in the future. This type of lending places reliance on computer-based loan approval systems to supplement other underwriting standards.

 

Consumer and all other - portfolios carry risks associated with the creditworthiness of the borrower and changes in the economic environment. The Company manages these risks through policies and procedures such as experienced underwriting, maximum debt to income ratios, and minimum borrower credit scores. Also included in this category are loans that generally support small business lines of credit and agricultural lending neither of which are a material source of business for the Company.

 

Affordable Housing Entities

The Company invests in private investment funds that make equity investments in multifamily affordable housing properties that provide affordable housing tax credits for these investments. The activities of these entities are financed with a combination of invested equity capital and debt. For the three and six months ended June 30, 2016, the Company recognized amortization of $130,000 and $260,000, respectively, and tax credits of $210,000 and $420,000, respectively, associated with these investments within “Income tax expense” on the Company’s Consolidated Statements of Income. For the three and six months ended June 30, 2015, the Company recognized amortization of $104,000 and $279,000, respectively, and tax credits of $170,000 and $427,000, respectively. The carrying value of the Company’s investments in these qualified affordable housing projects was $8.1 million and $8.5 million as of June 30, 2016 and December 31, 2015, respectively. The Company recorded a liability of $5.3 million for the related unfunded commitments as of June 30, 2016, which are expected to be paid from 2016 to 2019.

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Adoption of New Accounting Standards

In February 2015, the FASB issued revised guidance to simplify the consolidation assessment required to evaluate whether organizations should consolidate certain legal entities such as limited partnerships, limited liability corporations, and securitization structures. The guidance also removed the indefinite deferral of specialized guidance for certain investment funds. The Company adopted ASU No. 2015-02, “Amendments to the Consolidation Analysis” during the first quarter of 2016. The adoption of ASU 2015-02 did not have a material impact on the Company’s consolidated financial statements.

 

Recent Accounting Pronouncements

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in OCI the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of AFS debt securities in combination with other deferred tax assets. The ASU provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes. The ASU also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is only permitted for the provision related to instrument-specific credit risk. The Company is currently assessing the impact ASU 2016-01 will have on its consolidated financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” This ASU requires lessees to put most leases on their balance sheets but recognize expenses in the income statement in a manner similar to today’s accounting. The guidance also eliminates the real estate-specific provisions and changes the guidance on sale-leaseback transactions, initial direct costs and lease executory costs for all entities. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the impact ASU 2016-02 will have on its consolidated financial statements.

 

In March 2016, the FASB issued ASU No. 2016-05, “Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.” This ASU clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument in an existing hedging relationship would not, in and of itself, be considered a termination of the derivative instrument or a change in a critical term of the hedging relationship. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the adoption of ASU 2016-05 to have a material impact on its consolidated financial statements.

 

In March 2016, the FASB issued ASU No. 2016-06, “Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments.” This ASU clarifies that in assessing whether an embedded contingent put or call option is clearly and closely related to the debt host, an entity is required to perform only the four-step decision sequence in ASC 815-15-25-42 (as amended by the ASU). The entity does not have to separately assess whether the event that triggers its ability to exercise the contingent option is itself indexed only to interest rates or credit risk. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the adoption of ASU 2016-06 to have a material impact on its consolidated financial statements.

 

In March 2016, the FASB issued ASU No. 2016-07, “Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting.” This ASU simplifies the equity method of accounting by eliminating the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in the level of ownership interest or degree of influence. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively and early adoption is permitted. The Company does not expect the adoption of ASU 2016-07 to have a material impact on its consolidated financial statements.

 

In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” This ASU amends the principal-versus-agent implementation guidance and illustrations in the FASB’s new revenue standard (ASU 2014-09) and clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. The ASU has

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the same effective date as the new revenue standard (as amended by the one-year deferral and the early adoption provisions in ASU 2015-14 delaying the effective date to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017). In addition, entities are required to adopt the ASU by using the same transition method they used to adopt the new revenue standard. The Company is currently assessing the impact ASU 2016-08 will have on its consolidated financial statements.

 

In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted; however, if the Company elects to early adopt, then all amendments must be adopted in the same period. The Company is currently assessing the impact ASU 2016-09 will have on its consolidated financial statements.

 

In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” This ASU amends certain aspects of the FASB’s new revenue standard, specifically the standard’s guidance on identifying performance obligations and the implementation guidance on licensing. The amendments in this update affect the guidance in ASU 2014-09, Revenue from Contracts with Customers, which is not yet effective. The ASU has the same effective date as the new revenue standard (as amended by the one-year deferral and the early adoption provisions in ASU 2015-14). The Company is currently assessing the impact ASU 2016-10 will have on its consolidated financial statements.

In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.” This ASU amends certain aspects of the FASB's new revenue standard to reduce the potential for diversity in practice at the initial application of Topic 606 by entities with transactions that fall into the scope of this guidance, as well as reducing the cost and complexity of applying Topic 606 at the transition date and on a continual basis. These amendments affect ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), that is not yet effective. The Company is currently assessing the impact ASU 2016-12 will have on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU updates the existing guidance to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and required consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This amendment is effective for fiscal years beginning after December 15, 2019. The Company is currently assessing the impact ASU 2016-13 will have on its consolidated financial statements.

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2. SECURITIES 

Available for Sale

The amortized cost, gross unrealized gains and losses, and estimated fair values of securities available for sale as of June 30, 2016 and December 31, 2015 are summarized as follows (dollars in thousands):

 

	Amortized				Gross Unrealized								Estimated
	Cost				Gains				(Losses)				Fair Value
June 30, 2016
Obligations of states and political subdivisions	$	258,968			$	13,848			$	(30	)		$	272,786
Corporate bonds	109,757				506				(1,684		)		108,579
Mortgage-backed securities	545,428				10,165				(629		)		554,964
Other securities	13,285				49				—				13,334
Total available for sale securities	$	927,438			$	24,568			$	(2,343	)		$	949,663
December 31, 2015
Obligations of states and political subdivisions	$	257,740			$	10,479			$	(140	)		$	268,079
Corporate bonds	77,628				55				(1,704		)		75,979
Mortgage-backed securities	544,823				6,127				(2,779		)		548,171
Other securities	11,085				—				(22		)		11,063
Total available for sale securities	$	891,276			$	16,661			$	(4,645	)		$	903,292

 

The following table shows the gross unrealized losses and fair value (in thousands) of the Company’s available for sale investments with unrealized losses that are not deemed to be other-than-temporarily impaired as of June 30, 2016 and December 31, 2015. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.

 

	Less than 12 months								More than 12 months								Total
	Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
June 30, 2016
Obligations of states and political subdivisions	$	—			$	—			$	631			$	(30	)		$	631			$	(30	)
Mortgage-backed securities	67,843				(266		)		42,840				(363		)		110,683				(629		)
Corporate bonds and other securities	11,242				(331		)		36,250				(1,353		)		47,492				(1,684		)
Total available for sale	$	79,085			$	(597	)		$	79,721			$	(1,746	)		$	158,806			$	(2,343	)
December 31, 2015
Obligations of states and political subdivisions	$	8,114			$	(70	)		$	4,950			$	(70	)		$	13,064			$	(140	)
Mortgage-backed securities	287,113				(2,442		)		21,660				(337		)		308,773				(2,779		)
Corporate bonds and other securities	36,157				(751		)		19,558				(975		)		55,715				(1,726		)
Total available for sale	$	331,384			$	(3,263	)		$	46,168			$	(1,382	)		$	377,552			$	(4,645	)

 

As of June 30, 2016, there were $79.7 million, or 21 issues, of individual available for sale securities that had been in a continuous loss position for more than 12 months. These securities had an unrealized loss of $1.7 million and consisted of municipal obligations, mortgage-backed securities, and corporate bonds. As of December 31, 2015, there were $46.2 million, or 20 issues, of individual securities that had been in a continuous loss position for more than 12 months. These securities had an unrealized loss of $1.4 million and consisted of municipal obligations, mortgage-backed securities, corporate bonds, and other securities. The Company has determined that these securities are temporarily impaired as of June 30, 2016 and December 31, 2015 for the reasons set out below:

 

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Mortgage-backed securities. This category’s unrealized losses are primarily the result of interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, the Company does not intend to sell the investments, and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired. Also, the majority of the Company’s mortgage-backed securities are agency-backed securities, which have a government guarantee.

 

Obligations of state and political subdivisions. This category’s unrealized losses are primarily the result of interest rate fluctuations and also a certain few ratings downgrades brought about by the impact of the economic downturn on states and political subdivisions. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.

 

Corporate bonds. The Company’s unrealized losses in corporate debt securities are related to both interest rate fluctuations and ratings downgrades for a limited number of securities. The majority of the securities remain investment grade and the Company’s analysis did not indicate the existence of a credit loss. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments before recovery of its amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.

 

The following table presents the amortized cost and estimated fair value of available for sale securities as of June 30, 2016 and December 31, 2015, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

	June 30, 2016								December 31, 2015
	Amortized Cost				Estimated Fair Value				Amortized Cost				Estimated Fair Value
Due in one year or less	$	11,376			$	11,512			$	8,380			$	8,370
Due after one year through five years	101,658				104,839				65,326				66,996
Due after five years through ten years	318,124				326,477				296,864				301,920
Due after ten years	496,280				506,835				520,706				526,006
Total securities available for sale	$	927,438			$	949,663			$	891,276			$	903,292

 

The following table presents the estimated fair value of available for sale securities which were pledged to secure public deposits, repurchase agreements, and for other purposes as permitted or required by law as of June 30, 2016 and December 31, 2015 (dollars in thousands):

 

	June 30, 2016				December 31, 2015
Public deposits	$	183,813			$	184,635
Repurchase agreements	122,562				126,120
Other purposes (1)	23,540				26,546
Total pledged securities	$	329,915			$	337,301

 

(1) The "Other purposes" category consists of borrowings, derivatives, and accounts held at the Bank.

 

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Held to Maturity

During the second quarter of 2015, the Company transferred securities, which it intends and has the ability to hold until maturity, with a fair value of $201.8 million on the date of transfer, from securities available for sale to securities held to maturity. The Company transferred these securities to held to maturity to reduce the impact of price volatility on capital and in consideration of changes to the regulatory environment. The securities included net pre-tax unrealized gains of $8.1 million at the date of transfer with a remaining balance of $5.9 million as of June 30, 2016.

 

The Company reports securities held to maturity on the Consolidated Balance Sheets at carrying value. Carrying value is amortized cost which includes any unamortized unrealized gains and losses recognized in accumulated other comprehensive income prior to reclassifying the securities from securities available for sale to securities held to maturity. Investment securities transferred into the held to maturity category from the available for sale category are recorded at fair value at the date of transfer. The unrealized holding gain or loss at the date of transfer is retained in accumulated other comprehensive income and in the carrying value of the securities held to maturity. Such unrealized gains/(losses) are accreted over the remaining life of the security with no impact on future net income.

 

The carrying value, gross unrealized gains and losses, and estimated fair values of securities held to maturity as of June 30, 2016 and December 31, 2015 are summarized as follows (dollars in thousands):

 

	Carrying				Gross Unrealized								Estimated
	Value				Gains				(Losses)				Fair Value
June 30, 2016
Obligations of states and political subdivisions (1)	$	202,917			$	9,153			$	(121	)		$	211,949
December 31, 2015
Obligations of states and political subdivisions	$	205,374			$	5,748			$	(1,685	)		$	209,437

 

(1) The carrying value includes $5.9 million of net unrealized gains present at the time of transfer from available for sale securities, net of any accretion.

 

The following table shows the gross unrealized losses and fair value (in thousands) of the Company’s held to maturity securities with unrealized losses that are not deemed to be other-than-temporarily impaired as of June 30, 2016 and December 31, 2015. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.

 

	Less than 12 months								More than 12 months								Total
	Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
June 30, 2016
Obligations of states and political subdivisions	$	—			$	—			$	1,148			$	(121	)		$	1,148			$	(121	)
December 31, 2015
Obligations of states and political subdivisions	$	7,056			$	(1,685	)		$	—			$	—			$	7,056			$	(1,685	)

 

As of June 30, 2016, there were $1.1 million, or 2 issues, of individual held to maturity securities that had been in a continuous loss position for more than 12 months. These securities had an unrealized loss of $121,000 and consisted of municipal obligations. The Company has determined that these securities are temporarily impaired as of June 30, 2016 and December 31, 2015 for the reasons set out below:

Obligations of state and political subdivisions. This category’s unrealized losses are primarily the result of interest rate fluctuations and also a certain few ratings downgrades brought about by the impact of the economic downturn on states and political subdivisions. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before

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recovery of its amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.

The following table presents the amortized cost and estimated fair value of held to maturity securities as of June 30, 2016 and December 31, 2015, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

	June 30, 2016								December 31, 2015
	Carrying Value (1)				Estimated Fair Value				Carrying Value				Estimated Fair Value
Due in one year or less	$	857			$	857			$	1,488			$	1,491
Due after one year through five years	18,122				18,564				4,294				4,348
Due after five years through ten years	45,802				47,469				44,736				45,501
Due after ten years	138,136				145,059				154,856				158,097
Total securities held to maturity	$	202,917			$	211,949			$	205,374			$	209,437

 

(1) The carrying value includes $5.9 million of net unrealized gains present at the time of transfer from available for sale securities, net of any accretion.

 

The following table presents the estimated fair value of held to maturity securities which were pledged to secure public deposits as permitted or required by law as of June 30, 2016 and December 31, 2015 (dollars in thousands):

 

	June 30, 2016				December 31, 2015
Public deposits	$	211,949			$	207,140
Total pledged securities	$	211,949			$	207,140

 

Restricted Stock, at cost

Due to restrictions placed upon the Bank’s common stock investment in the Federal Reserve Bank and FHLB, these securities have been classified as restricted equity securities and carried at cost. These restricted securities are not subject to the investment security classifications and are included as a separate line item on the Company’s Consolidated Balance Sheets. At June 30, 2016 and December 31, 2015, the FHLB required the Bank to maintain stock in an amount equal to 4.25% of outstanding borrowings and a specific percentage of the Bank’s total assets. The Federal Reserve Bank required the Bank to maintain stock with a par value equal to 6% of its outstanding capital at both June 30, 2016 and December 31, 2015. Restricted equity securities consist of Federal Reserve Bank stock in the amount of $23.8 million for both June 30, 2016 and December 31, 2015 and FHLB stock in the amount of $38.4 million and $28.0 million as of June 30, 2016 and December 31, 2015, respectively.

 

Other-Than-Temporary-Impairment

During each quarter, the Company conducts an assessment of the securities portfolio for OTTI consideration. The assessment considers factors such as external credit ratings, delinquency coverage ratios, market price, management’s judgment, expectations of future performance, and relevant industry research and analysis. An impairment is other-than-temporary if any of the following conditions exist: the entity intends to sell the security; it is more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis; or the entity does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell). If a credit loss exists, but an entity does not intend to sell the impaired debt security and is not more likely than not to be required to sell before recovery, the impairment is other-than-temporary and should be separated into a credit portion to be recognized in earnings and the remaining amount relating to all other factors recognized as other comprehensive loss. Based on the assessment for the quarter ended June 30, 2016, and in accordance with the guidance, no OTTI was recognized. For the year ended December 31, 2015, the Company determined that a municipal security in the available for sale portfolio incurred credit-related OTTI of $300,000.  During the quarter ended March 31, 2016, the municipal security was sold.  As a result, the Company recognized an additional loss on sale of the previously written down security.

 

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Realized Gains and Losses

The following table presents the gross realized gains and losses on the sale of securities available for sale and the proceeds from the sale of securities during the three and six months ended June 30, 2016 and 2015 (dollars in thousands). The Company did not sell any investment securities that are held to maturity.

 

	Three Months Ended June 30, 2016				Six Months Ended June 30, 2016
Realized gains (losses):
Gross realized gains	$	3			$	242
Gross realized losses	—				(96		)
Net realized gains	$	3			$	146
Proceeds from sales of securities	$	892			$	15,424

	Three Months Ended June 30, 2015				Six Months Ended June 30, 2015
Realized gains (losses):
Gross realized gains	$	491			$	684
Gross realized losses	(87		)		(87		)
Net realized gains	$	404			$	597
Proceeds from sales of securities	$	45,658			$	58,157

 

3. LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are stated at their face amount, net of deferred fees and costs, and consist of the following at June 30, 2016 and December 31, 2015 (dollars in thousands):

	June 30, 2016				December 31, 2015
Construction and Land Development	$	765,997			$	749,720
Commercial Real Estate - Owner Occupied	831,880				860,086
Commercial Real Estate - Non-Owner Occupied	1,370,745				1,270,480
Multifamily Real Estate	337,723				322,528
Commercial & Industrial	469,054				435,365
Residential 1-4 Family	992,457				978,469
Auto	244,575				234,061
HELOC	519,196				516,726
Consumer and all other	409,471				304,027
Total loans held for investment, net(1)	$	5,941,098			$	5,671,462

 

(1) Loans, as presented, are net of deferred fees and costs totaling $1.9 million and $3.0 million as of June 30, 2016 and December 31, 2015, respectively.

 

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The following table shows the aging of the Company’s loan portfolio, by segment, at June 30, 2016 (dollars in thousands):

 

	30-59 Days Past Due				60-89 Days Past Due				Greater than 90 Days and still Accruing				PCI				Nonaccrual				Current				Total Loans
Construction and Land Development	$	402			$	1,177			$	116			$	5,013			$	1,604			$	757,685			$	765,997
Commercial Real Estate - Owner Occupied	912				—				439				20,692				1,661				808,176				831,880
Commercial Real Estate - Non-Owner Occupied	267				—				723				18,297				—				1,351,458				1,370,745
Multifamily Real Estate	—				—				—				2,092				—				335,631				337,723
Commercial & Industrial	2,464				62				117				1,354				263				464,794				469,054
Residential 1-4 Family	5,476				5,033				1,302				17,805				5,448				957,393				992,457
Auto	1,282				377				144				—				140				242,632				244,575
HELOC	1,347				1,228				642				1,517				1,495				512,967				519,196
Consumer and all other	1,364				412				50				400				250				406,995				409,471
Total Loans Held For Investment	$	13,514			$	8,289			$	3,533			$	67,170			$	10,861			$	5,837,731			$	5,941,098

 

The following table shows the aging of the Company’s loan portfolio, by segment, at December 31, 2015 (dollars in thousands):

	30-59 Days Past Due				60-89 Days Past Due				Greater than 90 Days and still Accruing				PCI				Nonaccrual				Current				Total Loans
Construction and Land Development	$	3,155			$	380			$	128			$	5,986			$	2,113			$	737,958			$	749,720
Commercial Real Estate - Owner Occupied	1,714				118				103				27,388				3,904				826,859				860,086
Commercial Real Estate - Non-Owner Occupied	771				—				723				13,519				100				1,255,367				1,270,480
Multifamily Real Estate	—				—				272				1,555				—				320,701				322,528
Commercial & Industrial	1,056				27				124				1,813				429				431,916				435,365
Residential 1-4 Family	15,023				6,774				3,638				21,159				3,563				928,312				978,469
Auto	2,312				233				60				—				192				231,264				234,061
HELOC	2,589				1,112				762				1,791				1,348				509,124				516,726
Consumer and all other	1,167				689				19				526				287				301,339				304,027
Total Loans Held For Investment	$	27,787			$	9,333			$	5,829			$	73,737			$	11,936			$	5,542,840			$	5,671,462

 

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The following table shows the PCI loan portfolios, by segment and their delinquency status, at June 30, 2016 (dollars in thousands):

 

	30-89 Days Past Due				Greater than 90 Days				Current				Total
Construction and Land Development	$	3			$	361			$	4,649			$	5,013
Commercial Real Estate - Owner Occupied	1,098				1,495				18,099				20,692
Commercial Real Estate - Non-Owner Occupied	795				171				17,331				18,297
Multifamily Real Estate	—				—				2,092				2,092
Commercial & Industrial	149				—				1,205				1,354
Residential 1-4 Family	1,014				1,213				15,578				17,805
HELOC	137				510				870				1,517
Consumer and all other	—				—				400				400
Total	$	3,196			$	3,750			$	60,224			$	67,170

 

The following table shows the PCI loan portfolios, by segment and their delinquency status, at December 31, 2015 (dollars in thousands):

 

	30-89 Days Past Due				Greater than 90 Days				Current				Total
Construction and Land Development	$	369			$	241			$	5,376			$	5,986
Commercial Real Estate - Owner Occupied	1,139				1,412				24,837				27,388
Commercial Real Estate - Non-Owner Occupied	755				202				12,562				13,519
Multifamily Real Estate	—				—				1,555				1,555
Commercial & Industrial	209				21				1,583				1,813
Residential 1-4 Family	2,143				1,923				17,093				21,159
HELOC	410				458				923				1,791
Consumer and all other	—				—				526				526
Total	$	5,025			$	4,257			$	64,455			$	73,737

 

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The Company measures the amount of impairment by evaluating loans either in their collective homogeneous pools or individually. The following table shows the Company’s impaired loans, excluding PCI loans related to the StellarOne acquisition, by segment at June 30, 2016 and December 31, 2015 (dollars in thousands):

	June 30, 2016												December 31, 2015
	Recorded Investment				Unpaid Principal Balance				Related Allowance				Recorded Investment				Unpaid Principal Balance				Related Allowance
Loans without a specific allowance
Construction and Land Development	$	29,877			$	30,354			$	—			$	33,250			$	33,731			$	—
Commercial Real Estate - Owner Occupied	11,201				11,317				—				7,781				8,983				—
Commercial Real Estate - Non-Owner Occupied	3,993				3,993				—				5,328				5,325				—
Multifamily Real Estate	3,777				3,777				—				3,828				3,828				—
Commercial & Industrial	1,154				1,572				—				711				951				—
Residential 1-4 Family	10,065				11,024				—				7,564				8,829				—
Auto	—				—				—				7				7				—
HELOC	1,900				2,046				—				1,786				2,028				—
Consumer and all other	247				297				—				211				211				—
Total impaired loans without a specific allowance	$	62,214			$	64,380			$	—			$	60,466			$	63,893			$	—
Loans with a specific allowance
Construction and Land Development	$	1,833			$	2,234			$	64			$	3,167			$	3,218			$	538
Commercial Real Estate - Owner Occupied	2,291				2,320				49				3,237				3,239				358
Commercial Real Estate - Non-Owner Occupied	267				267				1				907				907				75
Commercial & Industrial	1,334				1,456				47				1,952				1,949				441